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Macro investigation on China's engineering insurance industry: based on industrial organization theories

Xiaowei Zhou (South China University of Technology, Guangzhou, China)
Yousong Wang (South China University of Technology, Guangzhou, China)
Yangbing Zhang (South China University of Technology, Guangzhou, China)
Fangfang Liu (South China University of Technology, Guangzhou, China)

Engineering, Construction and Architectural Management

ISSN: 0969-9988

Article publication date: 28 February 2023

112

Abstract

Purpose

In China, engineering insurance has been questioned as not being beneficial as expected. This paper seeks to further understand how China's engineering insurance industry functions and to provide a macro perspective explanation for engineering insurance's underdevelopment.

Design/methodology/approach

Three industrial organization hypotheses were extended to the engineering insurance context: structure conduct performance (SCP), relative market power (RMP) and efficiency structure (ES) hypotheses. This paper employed the Generalized Method of Moments (GMM) and Data Envelopment Analysis (DEA) bootstrap to test the hypotheses using panel data from 2008 to 2017.

Findings

The results suggest that the SCP paradigm is validated in China's engineering insurance market, indicating a concentrated market where the welfare of consumers (e.g. owners, contractors and designers) may be eroded. Several factors are identified to have significant impacts on engineering insurers' performance, such as the investment return, percentage of engineering business, the ratio of outstanding claims, the number of large contractors, market rivalry and entry barriers.

Originality/value

Despite the sheer size of China's construction industry and the urgent need to improve risk management, the insurance industry that serves construction firms engineering insurance is underdeveloped. Engineering insurance is yet to be understood from a macro perspective, which may reveal the underlying reasons for engineering insurance's underdevelopment. The industrial organization theories provided a theoretical framework to test the functioning of this specific industry. The disaggregated data (engineering line specific) is employed to ensure effective regulation and policymaking.

Keywords

Citation

Zhou, X., Wang, Y., Zhang, Y. and Liu, F. (2023), "Macro investigation on China's engineering insurance industry: based on industrial organization theories", Engineering, Construction and Architectural Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ECAM-03-2022-0219

Publisher

:

Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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